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In this Edition, the first for 2021, we consider CGI Glass Lewis’ proxy voting guidelines for the new year, the Joint Parliamentary Committee’s report on litigation funding and ASIC reports on COVID-19 and audit-related matters.  We also look ahead at what President Biden’s inauguration this may mean for the United States, and the broader global economy.


Updated proxy voting guidelines released by CGI Glass Lewis. CGI Glass Lewis has released its 2021 Proxy Voting Policy Guidelines for Australia containing two key revisions when compared with the 2019/2020 guidelines.  First, from a board diversity perspective, CGI Glass Lewis recommends shareholders vote against board members of ASX300 companies with six directors but less than two female directors, or with five directors but less than one female director. However, CGI Glass Lewis recognises there may be reasonable exceptions to this guideline where companies demonstrate high female representation in their senior management team or where companies demonstrate a credible plan to improve board diversity.  Second, CGI Glass Lewis recommends shareholders vote against the audit and/or risk committee Chair where the committee does not include an audit and financial reporting expert (such as a chartered accountant or retired CFO).  However, where such a person does not sit on the committee, CGI Glass Lewis will also consider the appropriateness of the collective experience of the committee before voting. These key guidelines are indicative of trends in shareholder sentiments, and could be reflective of likely areas of scrutiny for listed companies in 2021. 

Parliamentary committee report on litigation funding. On 21 December 2020, the Parliamentary Joint Committee on Corporations and Financial Services released its report on litigation funding and the regulation of the class action industry. The report recommends wide-ranging reforms to the class action regime and regulation of litigation funders. If these recommendations are implemented, the oversight of litigation funders will increase significantly and will provide a welcome increase in certainty for companies which may be subject to shareholder class actions. See the Parliamentary Joint Committee’s report.


ASIC and IOSCO report on retail market conduct issues arising from COVID-19. ASIC and IOSCO have published the Retail Market Conduct Task Force Report: Initial Findings and Observations about the impact of COVID-19 on Retail Market Conduct. The Report responds to the economic uncertainty global markets have experienced during the pandemic and identifies preliminary observations of common retail market conduct issues. The Report identifies a number of common themes experienced during COVID-19 which should come as no surprise to those in the market, including high market volatility, heightened financial and psychological stressors and an increase in aggressive advertising, online marketing and digital offerings of financial products. The key observations identified as being caused or exacerbated by COVID-19 include the unique market environment emanating from the pandemic, the impact on firm and investor behaviour, common drivers of retail misconduct and corresponding challenges and opportunities for regulators. See ASIC’s media release.

ASIC reports on audit inspection findings for 12 months to 30 June 2020.  In December 2020, ASIC reported on its audit inspection findings for the 12 months ending 30 June 2020.  ASIC’s latest review found that auditors did not obtain reasonable assurance that the financial reports were free from material misstatement in 27% of the key audit areas that ASIC reviewed. ASIC’s report includes better practice recommendations from its reviews of conflicts of interest, firm governance and accountability for audit quality at the larger audit firms.  The report also includes focus areas for audits under COVID-19 conditions. Overall, ASIC’s findings emphasise the need for directors and auditors to focus on impairment of non-financial assets given the extended impact of COVID-19 so that the market is properly informed about asset values and the expected future performance implied by those values.  See ASIC’s media release.

Easing the regulatory burden on charities.  The Federal, State and Territory Treasurers signed an agreement on 15 December 2020 providing relief from burdensome financial reporting requirements for Australian charities hit hard by the impacts of COVID-19. Following this agreement, certain charities will no longer be required to produce audited financial statements or reviewed financial statements. See the Treasurer’s media release.


Expiration of ASIC relief for capital raisings during COVID-19. The first quarter of 2021 will see a number of temporary initiatives and reforms announced throughout 2020 in response to COVID-19 begin to expire. For example, the ASIC relief enabling entities to make certain low doc offers to investors even if they did not meet all of the usual requirements expired on 1 January 2021. Consequently, companies will now need to meet all relevant requirements under the Corporations Act and relevant ASIC instruments to make offers under the low doc regime.

FIRB reforms take effect. The long-awaited suite of FIRB reforms took effect on 1 January 2021. Importantly, these reforms see the monetary thresholds for FIRB approval being reinstated to their pre-29 March 2020 amounts. However, the reforms also introduce a new approval trigger for “notifiable national security actions” which has a $0 monetary threshold. A notifiable national security action includes the acquisition of a “direct interest” (which is typically over 10%) in a national security business or in an entity that carries on a national security business and the acquisition of an interest in national security land.  The Treasurer is also given a call-in power over certain reviewable national security actions.  Directors should note that the concept of a “national security business” is linked to the Security of Critical Infrastructure Act 2018 which is currently undergoing reform and which may, if implemented in accordance with the exposure draft, give a wide meaning to “national security businesses” and therefore “notifiable national security actions”. See our article setting out the key changes to the FIRB regime.

Corporate insolvency reform legislation receives Royal Assent. The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 (Cth) has received Royal Assent with regulations to the Bill taking effect on 1 January 2021. As discussed in previous editions of Boardroom Brief, the Bill implements insolvency reforms to support small business, drawing on key features of the United States bankruptcy model. The amendments made to the Corporations Act include establishing a debt restricting process for eligible small companies and expanding situations where documents relating to the external administration of a company may be given electronically. See the Treasurer’s media release.

Clarity on the retrospective impact of whistleblower amendments.  In Alexiou v Australia and New Zealand Banking Group Limited [2020] FCA 1777, the Federal Court provided guidance on the proper interpretation of section 1644(2) of the Corporations Act, a transitional provision within the whistleblower regime of Part 9.4AAA. The whistleblower amendments, which took effect on 1 July 2019, have broader whistleblower protections which render employers liable for detrimental conduct suffered by whistleblowers and increase the available remedies for detriment suffered as a result of making protected disclosures. The Federal Court held that section 1644(2) applies to  disclosure made before 1 July 2019, but does not apply to detrimental conduct occurring before 1 July 2019. 


ASIC highlights focus areas for 31 December 2020 financial reports under COVID-19 conditions.  With reporting deadlines looming, Directors of companies with 31 December year-ends should note ASIC’s key focus areas for financial reporting.  Under COVID-19 conditions, ASIC expects those preparing financial reports to pay particular attention to factors affecting solvency and going concern assessments, asset value issues (including the impairment of non-financial assets – see further below) and events occurring after year end and before completing the financial report. Given the importance of financial reports and related disclosures in the current environment, companies should take care to ensure upcoming reports meet ASIC’s guidance. See ASIC’s media release.

Inauguration of 46th President of the United States. With the inauguration of the 46th US President, Joe Biden, the probability of a more stable approach to the economy and foreign affairs will buoy markets and provide encouragement to those with businesses or investments in the US, thanks to the promise of big stimulus packages and a more pragmatic style of government. It remains to be seen the extent to which Biden is willing and able to repair relations with China and whether this will enable greater alignment between Western economies and China.  With Brexit also offering the potential for a reset of bilateral trade arrangements, 2021 looms as a potential pivotal year for Australian foreign relations.

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